Paterson: NYS budget deficit up to $3.2 billion

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ALBANY - With the recession pinching tax collections, this year's state budget deficit has climbed $1.1 billion since July to $3.2 billion, according to a report due out Friday.

The state Budget Division also predicts next year's deficit will total $6.8 billion, up $2.2 billion from July's estimate.

Gov. David A. Paterson used these grim numbers Thursday to lobby for his plan to wipe out $5 billion in red ink over the next two years. Legislative leaders appeared to back two-thirds of Paterson's suggestions, but some in the State Senate balked at midyear cuts to education aid and Medicaid.

"If we don't act now, there will be a problem down the road," Paterson said, referring to December's deadline for more than $5 billion in payments to schools and localities.

He also said Wall Street bonuses would be down 22 percent in 2009 compared with last year. Income taxes paid on these bonuses to stockbrokers and investment bankers account for 20 percent of state revenue.

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Paterson said, "The only way out of this is for the legislature to act." He has ordered a special session for Nov. 10 and threatened it could last for days.

Still, Senate leaders expressed opposition to Paterson's paring of school aid and social services.

"We're not with . . . cutting services to children, to seniors [and] education," said Sen. John Sampson of Brooklyn, the Democratic conference leader.

Sen. Dean Skelos of Rockville Centre, the Republican leader, called for restoring STAR property-tax rebate checks once New York again has budget surpluses. He was responding to Paterson's plan, first reported by Newsday yesterday, to steer excess cash to low- and middle-income families in the form of an income tax credit, offsetting high school property taxes.

Lt. Gov. Richard Ravitch, who helped New York City avoid bankruptcy in the 1970s, warned against rolling the 2009-10 deficit into the next fiscal year - a common practice in the past. "We will have a bigger problem then, [because] we aren't going to turn the economy around in a year."

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